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Janus CEO says first-quarter stems more from equities strength, less from Gross

By Jennifer Ablan

NEW YORK (Reuters) - Janus Capital Group Inc (JNS.N), the firm that hired closely watched bond investor Bill Gross in September, said first-quarter earnings came in above expectations with the help of net inflows into its equity funds.

Janus Chief Executive Officer Richard Weil said on a conference call on Thursday that the story of the first quarter was the strength in equities, compared with the previous quarter, "which was about Bill Gross and Myron Scholes."

Since the surprise Sept. 26 announcement of Gross' hiring from Pacific Investment Management Co, shares of Janus have surged more than 15 percent. On Thursday Janus shares were up 3.29 percent in early trading to $18.52 a share.

Janus reported first-quarter 2015 net income of $44.6 million, or $0.23 per diluted share, compared with fourth-quarter 2014 net income of $46.7 million, or $0.24 per diluted share, and net income of $30.5 million, or $0.16 per diluted share, in the first quarter of 2014. The first-quarter results beat the analysts' average estimate by 3 cents a share, according to Thomson Reuters I/B/E/S.

Average assets under management during the first quarter of 2015 were $186 billion compared with $179.2 billion during the fourth quarter of 2014 and $173 billion during the first quarter of 2014.

At March 31, Janus Capital Group's total assets under management were $189.7 billion compared with $183.1 billion at Dec. 31, 2014, and $174.1 billion at March 31, 2014.

The increase in complex-wide assets during the first quarter of 2015 reflects net market appreciation of $5.6 billion and long-term net inflows of $1.1 billion, Janus said.

Daniel Fannon, equity analyst at Jefferies, said in a research note on Thursday that Janus earnings beat were predominately dominated by lower-than-expected negative performance fees as well as operating margins of 28.9 percent, above Jefferies' 26.5 percent estimate.

"Importantly flows remained positive at +1.0 billion, as the active equity segment continues to improve," he said. "We continue to believe JNS is well poised for improving growth trends across its franchise."

Jefferies has a buy rating on Janus shares with a price target of $21.

All told, Weil said two quarters of positive inflows for Janus are not enough and that the firm has "a lot of work ahead of us."

(Editing by Ted Botha)